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New Delhi - Improved prospects in Africa and the launch of 3G services in India have brightened the outlook for Bharti Airtel after currency losses led to a bigger-than-forecast drop in quarterly profit.
India's wireless market - the world's second biggest and the fastest growing - saw prices steady last year after firms including Vodafone and Reliance Communications engaged in a vicious price war to grab market share.
Africa remains a short-term worry for Bharti, where it acquired the loss-making telecoms operations of Zain in 15 countries in a $9bn deal in June to become the world's fifth-biggest wireless carrier.
"My sense is on a three year horizon, this company should be hugely profitable because that's the time it requires to rejig its costs," said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services, referring to Bharti.
"If the company is able to get such substantial revenue growth, it shows the company has been able to manage the consolidation. Now, cost management is a much simpler problem."
Bharti, India's top mobile carrier, is 32.2% owned by Southeast Asia's top telecoms firm SingTel and aims to launch third-generation (3G) wireless services across all its 13 telecoms zones in India by March.
New Delhi-based Bharti was founded by Chairperson Sunil Mittal, who starting his career selling bicycle parts, saw an opportunity in telecoms in the mid-1990s when India was opening up the sector for private participation.
Shares in India's top mobile carrier, valued at about $26bn, wiped out an early fall of 3.3% and were up 2.3% by 06:30 GMT as analysts said the company's earnings outlook had improved with the launch of 3G services in India.
Bharti said on Wednesday consolidated net profit fell 41% to 13.03 billion rupees ($286m) for its third-quarter ended December, from 21.95 billion rupees a year ago, based on international accounting standards.
Revenue rose 53% to 157.56 billion rupees from 103.05 billion a year ago.
A Reuters poll had on average expected net profit to fall 26% to 16.25 billion rupees on revenue of 155.40 billion rupees for the firm that operates in 19 countries across Asia and Africa with 199.6 million mobile customers at end-December.
Bharti competes in India with 14 other companies.
Analysts say consolidation is inevitable in the overcrowded sector, but a probe into allegations that telecoms licences and radio airwaves were given out too cheaply is a big overhang on the industry and regulatory rules stymie takeovers.
Loss related to Bharti's Africa business was at 5.25 billion rupees in the quarter ended on December 31.
"Our objective is to make the operations very profitable, revenue growth has picked up well," said Manoj Kohli, Bharti Airtel's CEO for international operations, referring to the company's operations in Africa.
Bharti has cut prices in 10 out of 16 African nations to boost usage and is looking for long-term growth rather than turning a quick profit on the continent, a move that is hurting rivals such as Kenya's Safaricom .
"Our objective is to provide affordability in Africa," said Kohli. "you will see as the restructuring continues and gets completed in the next one or two quarters the operating cost will get under control and therefore profitability will grow."
Indian consumer goods makers are scrambling to buy assets in Africa, applying their knowledge of challenging, lower-income markets to a continent where spending power is on the rise.
Launch of 3G services
Bharti, which spent $2.7bn last year to buy 3G radio airwaves in an auction, recently launched the services in southern Karnataka state, whose capital is the technology hub of Bangalore.
The company hopes to cover 40 cities by March and expand the services to 1 500 cities and towns by a year later.
Third-generation services facilitate faster internet on mobile phones and let customers use services such as video calls.
The services are expected to boost mobile carriers' data revenue in a market where low-margin voice calls account for close to 90% of the total revenue.
Bharti's monthly ARPU in India in the December quarter fell 14% to 198 rupees ($4.4) from a year ago. ARPU in Africa eased to $7.3 in the quarter from $7.4 in the quarter ended in September 2010.
The company said it repaid debt of $415m taken for the rollout of third-generation mobile services in the December quarter, and incurred a one-time brand promotion cost of 3.40 billion rupees.
